How to Manage Money as a Couple: 21 Rules You Need to FollowBuilding Wealth
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Did you know that money issues rank among the primary causes for stress in a relationship. According to 35 percent of the people participating in a bank survey, money problems were the main reason for friction and stress in their relationship.
It’s also interesting to point out that when it comes to secret keeping in a relationship, money is one of the main issues that people don’t talk about. In a survey, Americans were asked to mention the things that they don’t talk about with their partners. Past relationships topped the list for both men and women but wasteful and unaffordable purchases came in as a close second.
Learning How to Manage Money As A Couple
While learning how to manage money as a couple may be difficult and uncomfortable at first, it will be one of the essentials for the long-term survival of the relationship. Open and honest conversations about financial resources, spending habits, and ways to reduce wastefulness will be required to ensure effective couple money management. If you haven’t been particularly successful with couple money management in the past, we have some useful suggestions for you.
Here are the 21 most important rules to follow when learning how to manage money as a couple.
Financial management starts with honesty and openness. You need to know where you stand right now in order to make a plan for the future.
Let your partner know about your current financial status, your debt, and the financial responsibilities that you have to handle on a monthly basis. Your credit history, savings, and your money goals for the future should also be discussed.
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Good to Know: It’s also a good idea to let each other know how you approach money handling. Are you frugal? Are you attempting to save a certain amount each month? Are you an impulsive spender? Based on this information, it will become much easier to pinpoint a financial strategy that will work for both of you.
Who’s going to do the monthly budget? Are you going to pay the bills or will your partner? Who is going to handle grocery shopping in a responsible way? It’s important to know who’s responsible for what in the realm of money management. Couple money management is all about organization and building trust.
Good to Know: There are numerous financial responsibilities all couples need to address – rent, utility bills, loan payments, transportation expenses, groceries, making a contribution to the savings account, etc. When both of you are on the same page, you can easily minimize late payments. The best way to manage money as a couple is to be equally involved in the process.
This is one of the issues resulting in a lot of friction. Should you keep your money separate or should you put incomes together and base the joint monthly budget on this amount?
A Few Interesting Facts
- Statistics suggest that growing numbers of young couples are keeping their finances separate. Researchers found out that the trend was exceptionally common among low income couples.
- These people valued access to their own money over the loyalty and commitment demonstrated through the creation of a joint bank account.
- Millennials are getting married later than previous generations and they’re used to some financial independence. This is another factor contributing to the maintenance of separate finances.
There isn’t a right or wrong answer here. It’s up to you to decide what makes you feel more comfortable. Once the decision is made, however, you will need to have an honest discussion with your partner about your motivation. Both of these approaches deliver perks and shortcomings.
Keep in Mind: The one thing that matters the most is making sure you’re capable of covering the essentials as a couple. When you do, you’ll be free whether each one is going to spend the surplus individually or if you’ll save/invest the money.
It’s now time to identify the tools that will help you maintain a high level of financial accountability. If you are investing as a couple, for example, you can benefit from an option like Personal Capital.
It will help you put together a personalized investment strategy, get advice on your financial situation, do tax loss harvesting, and many others. Personal Capital is available via multiple channels for enhanced accessibility.
Pro Tip: Various other financial tools can be used for budgeting, income tracking, organizing receipts, managing debt and even retirement planning.
Even if you decide to be more liberal with the way you spend money, you should still be prepared for emergencies. When learning how to manage money as a couple, you have to focus on planning for unforeseen circumstances. An emergency fund is essential. It can help you address problems like a medical issue, the loss of a job, an accident, a family financial emergency. Emergency funds provide coverage for unexpected large events that will contribute to significant expenses.
Good to Know: A good rule of thumb is to save at least six months’ worth of income. Attempting to save money is a good option for contributing to the emergency fund.
Making a budget is one thing. Tracking how you’re keeping up with the budget is a completely different endeavor. When doing couple money management, you have to stress on accountability all the time. Make sure that you remain within the spending allotment for each type of expense. If you see a significant change, you may have to reconsider how money is allocated to the essentials in your life.
Useful Tip: The simplest way to handle the process is to put together a spreadsheet that pinpoints all of your expenses. Color coding per category of spending will give you a good idea if you’re keeping up with the budget allocation for the respective item.
It doesn’t really matter how young you are. The sooner you start with retirement planning, the better. Discuss retirement plans with your partner to make sure you both are on the same page.
Pro Tip: According to experts, it’s best to begin doing retirement planning in your 20s.This way, you will have more time to overcome emergencies while also testing out different investment methods. If you work for a business that offers a 401k plan, put in the maximum amount allowed. Alternatively, save some funds and explore different investment options.
Good to Know: Fundrise is an example of a real estate investment opportunity you can test out right now to save money for your retirement. You will be investing in a diversified portfolio of real estate projects throughout the US.
Certain financial issues will be difficult to approach and you may consider avoiding discussion about them altogether. To learn how to manage money as a couple, however, you will sometimes need to have difficult conversations. There will be instances where you will be short on cash. Talking about your current financial standing will be of paramount importance in such situations. Approach hard issues with love and with the understanding that the two of you are facing the problem together. Yelling at your partner and pointing a finger will not accomplish anything. Rather, discuss the financial issue that’s making you disappointed and why.
Did You Know? Telling your partner how you feel and letting them express their point of view will make it much easier for you to seek the solution that works for both parties involved.
Do you plan to buy a house in the future? Do you want to start a family? If so, you may want to identify the financial habits you can change right now in order to save more.
Pro Tip: Getting cash back on the items you’re already buying is one example of a clever way to save money. Ibotta makes that process easy.
Good to Know: You should also explore ways to save money on entertainment, travel, childcare, romantic experiences for the two of you, and various others.
Having a few separate joint accounts for common expenses is one of the best ways to manage money as a couple. Create one joint account for essential expenses like rent, utility bills, groceries, and telecommute expenses. Have a separate joint account for entertainment expenses like movie nights, travel, going on romantic dates, and buying new luxuries you’ll enjoy together.
Pro Tip: The first thing you will need is to determine how funds will be allocated to each activity. In order to accomplish this goal, you’ll have to go back to the first rule.
Nobody wants to talk about bad things happening in life but couple money management is about being prepared. It’s crucial to have this difficult conversation.
- What will happen if you have to live on a single income for a long period of time?
- What will you do if one of you gets really sick? How will you approach death in the family?
Nobody wants to imagine such scenarios, but they could become reality in the future. It’s best to be prepared for the worst-case scenario. If you know how to handle your money in such instances, the stress will be reduced, and you’ll find it easier to focus on recovery.
This one is related to the previous rule – once you get in a serious relationship or marriage, you’ll need to update your beneficiaries. Turn your significant other in the beneficiary who will receive your funds in the event of something happening to you.
Pro Tip: If you don’t want to make your partner a beneficiary, you will need to address the situation openly. This applies to your 401k, insurance or an investment portfolio that will pay dividends within a certain time period.
Good to Know: Managing your 401k isn’t always easy, which is why a tool can be beneficial.
Bloom 401k will help you analyze your savings, manage your account, avoid hidden fees, and ultimately – grow your money.
While a large and open discussion about finances and future goals is a good thing, you will need to revisit couple finances. Income-related issues will never remain static.
Pro Tip: Schedule a financial “date night” once per month or at an interval that works for the two of you. Use this opportunity to take a look at financial information. If you see that the original arrangement isn’t working, you’ll need to modify the plan.
Keep in Mind: The conversation about finances has to be ongoing. Your income will change – you may get a promotion. You may quit your job and start your own business. These events will change your outlook and your financial goals for the future. These are just a few of the reasons why you will need to revisit the conversation every now and then.
Couple finances will rarely affect just two people. Do you want to know how to manage money as a couple? Think about your extended family, as well, and set some ground rules.
Do you have children? Do you have an elderly parent or a disabled sibling that you’re taking care of? The needs of such dependent individuals will affect couple finances. Let your partner know what the scope of the financial burden is.
Based on this calculation, you can determine how to allocate a budget to caring for a family member. You should also know where to draw the line.
It’s typical for couples who face financial stability to have to deal with relatives asking for loans or assistance. In some instances, even friends will chime in with such requests.
When such people ask for assistance, you’ll need to decide as a couple if you can afford helping others. Saying no firmly and politely is a right you have. It shouldn’t impact friendships and relationships.
Pro Tip: If you do decide to give money, there should be strictly defined terms and conditions for the favor. Let the other party know when they’ll have to return the money and the exact amount (you may want to add some interest to the amount). Alternatively, you can act as a mentor and provide guidance on the best money-making methods.
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Keep in Mind: Regardless of the path you choose, you shouldn’t feel guilty. Nobody is entitled to benefiting from you, even if you’re currently financially stable.
While they are becoming more common, prenuptial agreements are still seen as controversial by many couples. The good news is that just like separate bank accounts, prenuptial agreements are on the rise.
Some worry that asking a partner to sign a prenup is indicative of a lack of trust. The truth of the matter is different, however. Singing a prenuptial agreement leads to a stronger marriage, studies suggest.
- Having a prenup crafted for you will enable you to address the most challenging financial issues you and your partner may face.
- You will have a legal professional guiding you through the process, reducing the stress of carrying out the conversation on your own.
Pro Tip: If you’re about to get married in the near future, discuss your feelings about a prenup. The creation of such a document can address many worries you’ll otherwise have in the future.
Once you craft a family budget, you may find out that your income isn’t sufficient to cover your needs. This is when you’ll have to start thinking about making more money as a couple.
Pro Tip: Short-term investments can also produce a nice return.
If you’re afraid of investing due to the lack of knowledge, opt for a tool like Worthy Bonds. This new app lets you invest in small businesses at 5% interest.
What To Do When Things Get Tough
When things get really hard, you should also be open to seeking a second job or an additional part-time employment opportunity. Whatever you choose, work as a team with your partner. Do you plan to spend the rest of your life with that person? If so, your financial dreams are common.
Once you pinpoint what you’re trying to accomplish, you should also decide together how you’re going to get there and whether you’ll need to make more money in the long run.
Have you noticed something unusual on the bank account statement? Such an anomaly could make you freak out and begin doubting your partner. Before you go out there and start snooping around, you may want to talk to the person that will give you an adequate answer.
Talk to your partner about your worries and don’t be afraid to seek information. There could be a misunderstanding or an error in your statement.
Pro Tip: If you can’t get information from your significant other, you can launch a financial investigation together. Doing something behind their back, however, will result in trust being broken (potentially in an irreparable way).
Have you followed all of the tips focusing on how to manage money as a couple? Are you still failing to meet your financial goals? It may be time to get some professional assistance. Couple money management isn’t always easy.
This is especially the case for older couples who get together after maintaining separate finances for most of their lives. People who find themselves in such a situation should seek assistance.
Pro Tip: Consultations with financial advisors and lawyers could shed some clarity on the best couple money management methods. While such consultations can prove to be costly at the time being, they will save you a lot of money in the long run.
Good to Know: Various online tools can also give you adequate financial advice on the basis of your current standing.
Is there something important in your life that you’d like to maintain access to? Talk to your partner about your needs. Based on those, you should be capable of maintaining a degree of financial autonomy. Even if it’s something small and stupid (a favorite hobby, a collection you like to maintain), you should be given the chance to invest in what you like doing. Working as a team will help you find a source of funding for that special activity.
Keep in Mind: Making more money isn’t always the answer. Sometimes, you’ll benefit from clever spending.
We all succumb to financial temptations every now and then. When this happens, you will need to face your partner. Talking about a financial “sin” openly and honestly is much better than your significant other finding about the transgression in another way.
If you feel like you’ve done something wrong, you will need to come clean. You will feel much better after a conversation and the two of you can choose a course that will help you reach your common financial goals regardless of bumps in the road. Understand one simple thing – if you cannot get a refund for something stupid you’ve bought, your partner will find out sooner or later.
When you maintain a friendly, open, and transparent environment, transgressions will do very little to hurt the relationship.
It’s rare for two people to share exactly the same financial habits.
You may be a frugal person while your partner is more frivolous.
Instead of feeling annoyed about these differences, learn how to make them work in your favor. Savers and spenders can work together and find the best way to manage money as a couple.
- Distribute responsibilities on the basis of your individual strengths.
- You will manage the savings/investments, while your partner will care for bills and expenditures.
- Don’t be afraid to experiment and try out different strategies when learning how to manage money as a couple.
A Great Benefit: Things will get better with time because you’ll get to know each other exceptionally well.
Based on this knowledge, you will determine the money making and saving approaches that will give you the best results, a comfortable lifestyle, and a lot of personal satisfaction.
How do you manage money when in a relationship? Do you have additional tips and suggestions we haven’t included in our guide?
Share your experience with us in the comments below.
Logan is a practicing CPA, Certified Student Loan Professional, and founder of Money Done Right, which he launched in July 2017. After spending nearly a decade in the corporate world helping big businesses save money, he launched his blog with the goal of helping everyday Americans earn, save, and invest more money. Learn more about Logan.